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5 Ways To Get Your First HDB Flat That You Can Afford

Here are some ways of ensuring that you buy a home which you can comfortably afford.

With so many things to consider, buying your first HDB flat can be a major life decision. You have to think about where you want to live, how big a flat you need, and most importantly, how much you can afford to spend.

It can be nerve-wrecking. With our limited land size and dense population, it’s natural to expect buying a home in Singapore to cost a fair bit of money.

That said, if you follow some of the practical ways that we will share in this article, owning a HDB flat could be a lot simpler and more affordable than you think.

# 1 Apply for a Build-To-Order (BTO) flat if you can plan ahead

We get it. Given a choice, everyone would prefer buying a flat at a location they want without having to wait.

But because completed units offer the convenience of immediate occupation, resale flats tend to be more expensive compared to their BTO counterparts.

For example, in the May 2016 BTO launch, the average price of a 4-room BTO flat in Sembawang was $260,000. Comparable resale flats in the vicinity cost about $369,000. Likewise in the mature town of Bedok, the average price of a 4-room BTO flat was $435,000, compared to resale flats in the area that cost about $630,000.

From our observation, opting for a new BTO flat instead of getting a similar resale flat in the area could save you about 25%.

But regardless of whether you decide to buy a resale flat or apply for a BTO flat, the important thing is to weigh the pros and the cons and decide for yourself which option best meets your budget and needs. Would you rather save some money and wait for your BTO flat to be ready or spend more to get a flat early?

# 2 Choose a Non-Mature Estate

Here are some comparisons of the median prices of 4-room resale flats between mature estates and non-mature estates in the same region.

Mature Estate Median Price Of 4-Room Flat (3Q2016) Non-mature Estate Median Price Of 4-Room Flat (3Q2016)
Ang Mo Kio $459,000 Sengkang $420,000
Bedok $410,000 Hougang $376,000
Clementi $530,900 Jurong $419,000

Source: HDB

The point here that we want to make is that by and large, HDB flats in mature estates may be more costly compared to those in non-mature estates. Home buyers can save quite a lot of money just by getting a flat in a non-mature estate.

During the May 2016 Sale of Balance Flats (SBF) launch, the prices of 5-room flats in Ang Mo Kio started at $515,000, while those in Sembawang were sold from as low as $313,000, before grants. That’s a difference of about $200,000, or 40% less!

Although non-mature estates are generally in less central locations, they have all the transportation links, amenities and facilities you need, and these will continue to get better. For example, the upcoming Thomson Line will further improve the transport connectivity of the non-mature estates in the North. Case in point – it now takes about 25 minutes to get from Bukit Panjang to Bugis.

You should also know that if your combined monthly salary is $8,500 or less, you can apply for the Special CPF Housing Grant (SHG) if you purchase a BTO flat from a non-mature estate that is 4-room or smaller.

For a couple who earns a combined salary of $5,000 a month, the grant is $45,000. That’s quite a fair bit of money, almost nine months of salary. Hence, you can choose flats that allow you to qualify for this grant so that you can spend less.

Read Also: Why You Should Choose (Wisely) To Spend Less On Your First BTO Flat

# 3 Choose the Right Flat Size

According to the Department Of Statistics, household size in Singapore has been shrinking over the past couple of decades. In the 1990s, 4-room flats tended to have about 4.5 people per flat; now, the number is closer to 3.5.


Source: Singstat

When you are buying your HDB flat, you should consider how much space you really need. If you plan to have two children, a 4-room flat may be a nice fit because it has three bedrooms, similar to a 5-room flat. It will also be more affordable. Moreover, you may qualify for the SHG if you purchase a BTO flat (4-room or smaller) in a non-mature estate. As your family grows bigger in the future, you can always choose to upgrade.

By choosing a flat size that is right for your family, you can avoid spending more than you need to.

# 4 Save On Interest

Some people justify spending more on a bigger flat by assuming that they can sell it for a bigger profit in the future.

Firstly, that sort of self-reasoning usually starts off with the individual(s) treating their HDB flat more as an investment than a home. Secondly, there is no guarantee that a person can surely sell his flat at a profit, In fact, our friend Kyith from InvestmentMoat wrote a popular article on why 5-room flats may actually be much poorer investments compared to 4-room flats.

What is guaranteed, however, is that you will pay more interest. Let us explain.

Let’s give ourselves two choices today. A 4-room flat ($300,000) and a 5-room flat ($400,000). We have $50,000 for a downpayment and will take a property loan for the remaining amount needed.

Flat Type Price Loan Required Monthly Repayment (Based on 20 years, 2.6% per annum)
4-Room $300,000 $250,000 $1,337
5-Room $400,000 $350,000 $1,872

* The calculation above assumes that buyers do not qualify for any housing grants

On first look, we would expect the repayment difference of $535 each month to be the direct result of the price difference between the two flats. But that’s not entirely true. Part of the difference in monthly repayment is due to interest differential.

What Happens If You Sell Your Flat 10 Years Later?

Flat Types Loan Taken Interest Paid (After 10 Years)
4-Room $250,000 $51,578
5-Room $350,000 $72,211
Difference $20,633

When buying a flat, many homeowners fail to realise that the selling prices that they see between two flats do not reflect the full difference in price. Since most of us need to take a property loan, we will also incur interest. The more expensive our flat, the bigger our loan. The bigger our loan, the more interest we end up paying.

# 5 Avoid Overspending On Renovation

Any amount spent on renovation is generally non-recoverable. Unlike furniture, where you can take them with you if and when you move out, you cannot “bring your renovation” with you.

And unless the next owner who purchase your flat have exactly the same taste as you, it’s unlikely that future buyers would pay you much more just because you tell them that you spent a lot of money on your renovation. In other words, any amount you spent on renovation should be treated as sunk cost, rather than be seen as an investment.

As such, you should keep in mind a renovation budget that you are comfortable with, and to design your ideal home based on that budget. If you don’t set a budget for yourself, it’s very easy to overspend on your renovation in the quest to build your dream home.

One simple solution is to reduce the amount of built-in cabinets and to go for loose furniture instead as they tend to be cheaper. They also provide better future flexibility compared to built-in cabinets

In Short: HDB flats are built for every budget and need.

It’s easy to get carried away and expand that wish list when buying a first home. We want a good centralised location near to an MRT station. We want it to be spacious and well renovated. We want it quick. Our expectations can be quite high.

However, we must remember that these expectations may need to be reprioritised to fit within our budget. So choose a flat that is based on your budget, rather than your expectations.

Happy house hunting!

Read Also: Step-By-Step Guide To Buying Your First BTO Flat

This article was written in partnership with the Ministry Of National Development. All views expressed in the article are the independent opinion of